BILL NUMBER: AB 1637	CHAPTERED  10/10/99

	CHAPTER   930
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 10, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 10, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	AMENDED IN SENATE   SEPTEMBER 9, 1999

INTRODUCED BY   Committee on Revenue and Taxation (Knox (Chair),
Kaloogian (Vice Chair), Aroner, Briggs, Ducheny, Honda, and Romero)

                        MARCH 3, 1999

   An act to amend Section 17039 of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1637, Committee on Revenue and Taxation.  Tentative minimum
tax.
   The Personal Income Tax Law provides that only certain credits may
reduce specified taxes below the tentative minimum tax.
   This bill would also allow credits for personal exemption and
credit for land and water conservation to reduce those taxes below
the tentative minimum tax.
  This bill would take effect immediately as a tax levy.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 17039 of the Revenue and Taxation Code is
amended to read:
   17039.  (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560.  Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any.  Credits
shall be allowed against "net tax" in the following order:
   (1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
   (2) Credits that contain carryover provisions but do not contain
refundable provisions.
   (3) Credits that contain both carryover and refundable provisions.

   (4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
   (5) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
   (6) Credits that contain refundable provisions but do not contain
carryover provisions.
   The order within each paragraph shall be determined by the
Franchise Tax Board.
   (b) Notwithstanding the provisions of Sections 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) and 19002
(relating to tax withholding), the credits provided in those sections
shall be allowed in the order provided in paragraph (6) of
subdivision (a).
   (c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits, but only after
allowance of the credit allowed by Section 17063:
   (A) The credit allowed by former Section 17052.4 (relating to
solar energy).
   (B) The credit allowed by former Section 17052.5 (relating to
solar energy).
   (C) The credit allowed by Section 17052.5 (relating to solar
energy).
   (D) The credit allowed by Section 17052.12 (relating to research
expenses).
   (E) The credit allowed by former Section 17052.13 (relating to
sales and use tax credit).
   (F) The credit allowed by Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
   (G) The credit allowed by Section 17053.5 (relating to the renter'
s credit).
   (H) The credit allowed by former Section 17053.8 (relating to
enterprise zone hiring credit).
   (I) The credit allowed by Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
   (J) The credit allowed by former Section 17053.11 (relating to
program area hiring credit).
   (K) For each taxable year beginning on or after January 1, 1994,
the credit allowed by Section 17053.17 (relating to Los Angeles
Revitalization Zone hiring credit).
   (L) The credit allowed by Section 17053.30 (relating to land and
water conservation).
   (M) The credit allowed by Section 17053.33 (relating to targeted
tax area sales or use tax credit).
   (N) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
   (O) The credit allowed by Section 17053.49 (relating to qualified
property).
   (P) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
   (Q) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
   (R) The credit allowed by Section 17054 (relating to credits for
personal exemption).
   (S) The credit allowed by Section 17057 (relating to clinical
testing expenses).
   (T) The credit allowed by Section 17058 (relating to low-income
housing).
   (U) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
   (V) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
   (W) The credit allowed by Section 19002 (relating to tax
withholding).
   (2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
   (d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
   (e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
   (2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
   (3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
   (f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
   (g) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity shall be
limited in accordance with paragraphs (2) and (3).
   (2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
determined by including income attributable to the disregarded
business entity that generated the credit or credit carryover, over
the taxpayer's regular tax (as defined in Section 17062), determined
by excluding the income attributable to that disregarded business
entity.  No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), determined by
excluding the income attributable to the disregarded business entity.

   (3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (c) and
(d).
  SEC. 2.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.
